Pound foolish?

New Delhi, Dec. 22: The Securities and Exchange Board of India (Sebi) is now investigating the stock movement of 68 small companies to check if manipulation led to the massive rise in their prices in September.

“We took action against 10-20 companies soon after we received evidence against them, while 68 were referred for further investigation,” said R. Ravichandran, officer on special duty at Sebi.

Sebi had booked manipulators of 20 penny stocks after noticing unusual movement in their prices in September. There were instances where the spike had been unusually sharp in a short span of time.

After a thorough investigation, Sebi had debarred the promoters and directors of companies such as Minal Engineering, IFSL, Ind Tra Deco and Prime Property Development Corporation from the market.

The market surveillance initiative, launched in September, analysed the movements in prices of about 1000 penny stocks.

Ravichandran said, in one particular case, the share price had registered an increase of over 6,000 per cent in a short time.

The unprecedented frenzy in the markets in September had prompted Sebi to keep a close watch on possible manipulators. The focus was on penny stocks and the rise in their prices. Most of these small companies had posted poor financial results, which raised Sebi’s suspicion.

Following Sebi’s initiative, prices of several small-cap and penny stocks, which were driven up during the July-September bull rally, fell sharply in subsequent weeks. This led to a major correction in the markets on September 22, a day after the market capitalisation of the NSE and the BSE touched an all-time high.

The panic led to a drop in the number of penny stocks being traded on the BSE from 2673 on September 15 to 2517 two days later.

Market analysts said several investors lost money in these stocks as they were unable to exit. The shares were locked in a lower circuit everyday with only sellers and no buyers.